On Wednesday, the 10-year yield gained more than on any day since the November 2016 presidential election. On Thursday, yield on the US 10-year Treasury rose above 3.2% Thursday morning. That's the highest it's been since July 2011.
The USD/JPY currency pair has traditionally had a close correlation with U.S. Treasuries. When Treasury bonds, notes and bills rise, USD/JPY prices weaken. When interest rates are heading higher, the U.S. dollar will move higher, the USD/JPY prices will strengthen.
So with Bond yields and interest rates rising, expect the USD/JPY to rise…well, not necessarily. During risk-off times, the only two currencies to appreciate relative to the USD are the Yen and the Swiss franc. For example, yesterday, when the DOW dropped 300+ points, the USD/JPY dropped as well.
So where the USD/JPY headed next, lets go to the charts to find out?
Monthly Chart (Curve Timeframe) – monthly supply is at 122.00 and monthly demand at 101.00.
Weekly Chart (Trend Timeframe) – the trend is range bound. No really good weekly demand or supply zones until price get to the monthly zones as indicated in green circles.
Daily Chart (Entry) – here's a closer look at what I was seeing on the weekly chart. The white rectangle represents the no trade zone,
One potential set-up would be if price can break out to the upside, a pull back into what would now be a daily demand zone would be a good place to go long to at least the 117.00 - 118.00 level.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
